A

PROJECT ON

“AGRICULTURAL FINANCE IN INDIA”

FINANCE

SUBMITTED TO

THE UNIVERSITY OF MUMBAI

IN PARTIAL FULFILLMENT FOR THE AWARD OF

THE DEGREE OF BACHELOR OF COMMERCE

(BANKING AND INSURANCE)

SEMESTER V

(ROLL NO. 13)

BY

CHHAYA DUBEY

THE K.M.AGARRWAL COLLEGE OF HIGHER EDUCATION

ACADEMIC YEAR 2016-2017

1
 K.M AGRAWAL COLLEGE OF ART COMMERCE & SCIENCE”

Conducted By;
(HINDI BHASHIK JANKALYAN SHIKSHAN SANTHA, KALYAN)

(Affiliated by university of Mumbai)

(B.COM)BACHLOR IN BANKING AND INSURANCE

CERTIFICATE
THIS IS TO CERTIFY THAT THE REPORT ON

“AGRICULTURAL
AGRICULTURAL FINANCE
 FINANCE IN INDIA”
IN INDIA

HAS BEEN SUBMITTED BY MS. CHHAYA SHASHIKANT DUBEY

Has been satisfactory completed & submitted under subject finance project
during the academic year 2016-2017 by the student of T.Y.B.COM

(BANKING AND INSURANCE)

EXTERNAL EXAMINER PRINCIPAL

(DR. MRS ANITA MANNA)

GUIDE COURSE CO-ORDINATOR

(MR.MAHENDRA PANDEY) (PROF.SUJEET SINGH)

2
 DECLARATION BY THE STUDENT

I, CHHHAYA SHASHIKANT DUBEY  the student of K. M. AGRAWAL

COLLEGE,  Kalyan studying in THIRD YEAR BACHELOR OF
COMMERCE (BANKING AND INSURANCE) Semester V  (2016-2017)
hereby declare that I have completed the project work on “AGRICULTURAL

FINANCE IN INDIA” successfully in the academic year.(2016-2017)

The information submitted or presented in this project work is true and original to
the best of my knowledge.

Place:

Date:

STUDENT SIGNATURE
(CHHAYA DUBEY)

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 ACKNOWLEDGEMENT

First, I would like to thank the K.M. AGRAWAL COLLEGE, KALYAN for
giving me the opportunity to make the project on subject “AGRICULTURAL FINANCE
IN INDIA” and explore my knowledge.

I would like to thank my college K.M. AGRAWAL for giving a great opportunity to do
work on this project.

I would like to thank MR. MAHENDRA PRATAP PANDEY SIR. For his valuable
advice and support in spite of his busy schedule, he was always there to give feedback and
guidelines whenever needed. Who have sincerely supported me with the valuable insights into
the completion of this project and without his active support and encouragement this project
would not have been possible
Thank you, Madam for mentoring and kind support for the accomplishment of the
 project.

Hereby, I want to take the opportunity to thank all sources, people, guides who helped me
to get the required data.

I also express my gratitude to all those who have not been mentioned in this report work
 but helped me in completing this report.

I am highly indebted to who provided me with the necessary information and also for the
support extended out to me in the completion of this project work and his valuable suggestion
and comments on bringing out this project report in the best way possible.

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 EXECUTIVE SUMMARY
Agriculture is the backbone of Indian economy and agricultural development is
Central to all strategies for planned development. The agricultural growth has
Powerful average effects on the rest of the economy and all the three basic
Objectives of economic development of the country, viz. output growth, price stability
And poverty alleviation are best served b y the growth of the agricultural sector.

Define agricultural finance as the study of the financing and liquidity services credit
 provides to farm borrowers. Others may define agricultural finance as the study of those
financial intermediaries who provide loan funds to agriculture, and the financial markets in
which these intermediaries obtain their funds. In fact, several a gricultural economist identified a
number of studies focusing on such additional topics as rural banking, insurance, income
distribution, farm financial management, and taxation. Finally, the stud y of agriculture finance
can be broaden even further to account for all economics and financial interfaces between
agricultural and the rest of the macroeconomics, including the effects that changes in national
economic policies have upon the economic performance of agriculture and financial position of
farm operator families.

Agricultural extension services have, of late, gained more importance in the

developmental agenda of the nation in the face of new challenges with which the agriculture
sector is currently confronted.

The major aim of Agro Money portal, is provide information regarding Agricultural
Credit, Policies & Schemes, Credit Agencies, Financial Inclusion, Microfinance, NREGA,
Market Information, Agricultural Best Practices, on & off Farm Enterprises and various Products
& Services.

Bank had recruited expert staff from various technical disciplines and created a separate
cadre of officers. These officers were involved in formulating, appraising, monitoring and
evaluating different agricultural projects implemented by different credit agencies. These
officers, irrespective of their academic background, were imparted similar type of training as all
other officers. Their placements and the regular job rotations helped in grooming them to take up
assorted assignments, get involved in a variety of roles and functions including credit,
developmental, promotional, supervisory and necessary support and information for decision
making. The Bank also had access to their specialized skills which were utilized whenever
needed.

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 INDEX
SR. PARTICULAR’S   PAGE
NO. NAO.

1] AGRICULTURAL FINANCE IN INDIA :-

1. Introduction 7
2. 3 R’s of Credit 12
3. Agriculture growth in India
4. Types of credit
5. Agricultural loans
6. Schemes for Agricultural finance
7. Indian Agricultural finance budget
8. Sources of Agricultural finance in India
9. India’s agriculture development problem
2]  NABARD :-
1. The function of NABARD
2. Mission
3. Organization structure
4.  Nabard budget for Agricultural finance in India
5.  Nabard performance
6.  Nabard role
3] WEB-BLIOGRAPHY
4] CONCLUSION

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 1. INTRODUCTION
Finance in agriculture is as important as development of technologies. Technical inputs
can be p u r c h a s e d a n d u s e d b y f a r m e r o n l y i f h e h a s m o n e y ( f u n d s ) . B u t h i s
own money is always inadequate and he needs outside finance or credit .Professional
money lenders were the only source of credit to agriculture till 1935. They use to charge unduly
high rates of interest and follow serious practices while giving loans and recovering them. As a
result, farmers were heavily burdened with debts and many of them perpetuated debts. There
were widespread discontents among farmers against these practices and there were instances of
riots also. With the passing of Reserve Bank of India Act 1934, District Central Co-op. Banks
Act and Land Development Banks Act, agricultural credit received simpletons and there were
improvements in agricultural credit.

A powerful alternative agency came into being. Large-scale credit became available with
reasonable rates of interest at easy terms, both in terms of granting loans and recovery of them.
Although the co-operative banks started fanancing agriculture with their establishments in
1930’s real imp tons was received only after Independence when suitable legislation were passed
and policies were formulated. Thereafter, bank credit to agriculture made phenomenal progress
 by opening branches in rural areas and attracting deposits. Till 14 major commercial banks were
nationalized in 1969, co-operative banks were the main institutional agencies providing finance
to agriculture. After nationalization, it was made mandator y for these banks to provide finance to
agriculture as a priority sector .

These banks undertook special programs of branch expansion and created a network of banking
services throughout the country and started financing agriculture on large scale. Thus agriculture
credit acquired multi-agency dimension. Development and adoption of new technologies and
availability of finance go hand in hand. In bringing "Green Revolution", "White Revolution" and

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 5. SCHEMES FOR AGRICULTURE FINANCE

1. SBT KISAN GOLD CARD SCHEME (General purpose Agriculture TermLoan)

a. ELIGIBILITY

a. Farmers having good track record of repayment for the last two years.
 b. Farmers who have closed their loan account without default and not our current
 borrowers.
c. Farmers who have defaulted in repayment but closed the Loan within the stipulated
repayment period.
d. Farmers who are maintaining deposits with the Bank.
e. Good borrowers of other banks provided they liquidate their dues with other banks.
f. Good farmers who have not availed loans from any bank.

 b. PURPOSE

The borrower is at liberty to utilize 50% of the amount for any purpose, including
consumption purpose and purchase of land.

c. AMOUNT OF LOAN

The amount of loan is limited to five times the annual farm income including
income from allied activities or 50% of the value of the land offered as collateral
security, whichever is less, subject to a maximum of Rs.10 lakh.

d. RATE OF INTEREST

Interest rate ranges from 1% below PLR.

e. SECURITY

Hypothecation of crops and assets, if any, created out of bank finance and existing
movable assets such as milch animals, pump sets etc. The loan will be secured by
equitable mortgage of properties worth double the loan amount, or term deposit
receipts, LIC policies of adequate surrender value, NSCs completed lock in period or
more etc.

f. DISBURSEMENT

Cash disbursals are allowed to the full extent of the credit limit.

g. REPAYMENT
The repayment period shall be 10 years. The due date of the installment shall be fixed in such a
way to coincide with the date of generation of income.

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2. KISAN CREDIT CARD SCHEME

a. ELIGIBILITY

All agriculturists who are in need of short term production requirements. ATM
facility and Personal Accident Insurance Scheme for life up to Rs.50000/- and
 permanent disability cover up to Rs.25000/- is available on request.

 b. PURPOSE

To provide hassle free short-term credit to farmers on the basis of their land
holdings for purchase of inputs and draw cash to meet their production needs. i.e.
Cultivation expenses including allied activities with a consumption component.

c. AMOUNT OF LOAN

To be fixed on the basis of operational holdings and scale of finance with

consumption component 15% (maximum Ra.10000/-) of production credit. The scale
of finance to farmers who own cultivated land below one acre will be at the rate of
Rs.40000/- (on pro rata basis) and farmers who own more than one acre with
intensive farming of land be given at the rate of Rs.37500/- per acre and part thereof.

d. RATE OF INTEREST

Interest rate ranges from 2.50% below to 1.50% above BPLR for various limits.

e. REPAYMENT

Running Cash Credit account for 36 months subject to annual review

and tot al ann ual cre dit should exceed annual debit.

3. HOMESTEAD FARMING

a. PURPOSE

A scheme for financing farmers practicing mixed cropping / inter cropping along
with allied activities to enable them to undertake cultivation of various crops in a
more integrated way. The scheme provides the farmers with sufficient working
capital required for their homestead farming(Mixed cropping along with allied
activities) by fixing scale of finance based on land holding to meet the cost of entire
farming activities.

 b. AMOUNT OF LOAN

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 The farmers who own cultivated land below one acre be given the scale of finance
on pro rata basis at the rate of Rs.40000/- and farmers who own more than one acre of
land be given at the rate of Rs.37500/- per acre and part thereof.

c. RATE OF INTEREST

Interest rate ranges from 2.50% below to 1.50% above BPLR for various limits.

d. REPAYMENT

The facility will be sanctioned as an Agriculture Cash Credit limit (In case of
Kisan Credit Card running cash credit).

4. LOAN FOR ESTATE PURCHASE

a. ELIGIBILITY

The estate should be either in yielding stage with the crops in its prime yield age
or capable of being developed in to a viable unit. The yield / net income of the estate
should be sufficient to liquid date the proposed loan and interest accrued with in a
 period of 7 to 10 years. The proposed estate should be free from encumbrance and
entire property should be offered as security to the loan.

 b. PURPOSE

To encourage those who prefer to settle down in agriculture and are in the look
out of good /viable estates for purchase and also to improve production in agriculture.

c. AMOUNT OF LOAN

The quantum of loan that will be considered for sanction will be 75% of the
registered value or 50% of the market value whichever is low. In exceptional cases
80% of the registered value or 50% of the market share whichever is low is also
considered. The loan for the development of the estate like land development
including working capital can also be sanctioned.

d. RATE OF INTEREST Interest rate same as BPLR

e. REPAYMENT

Repayment of loan will be in quarterly/half yearly / yearly installments depending

on the harvest of the crops and the loan shall be repaid within a maximum period of 7 to
10 years.

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5. S C H E M E F O R F I N A N C I N G F A R M E R S F O R P U R C H A S E
OF LA ND FOR AGRICULTURAL PURPOSES

a. ELIGIBILITY

Small and Marginal farmers - land maximum up to 5 acres of non-irrigated land

or 2.5 acres of irrigated land including the land purchased under the scheme. Tenant,
sharecropper and landless agricultural laborers with a good record of prompt
repayment of our loans for the last2 years are also eligible.

 b. PURPOSE

To finance small and marginal farmers, share croppers, tenant cultivators

For purchasing land to expand activities and to make existing small and marginal units
economically viable
to bring fallow lands and waste lands under cultivation to step up agricultural
 production as well as productivity also to finance share croppers / tenant farmers
to enable them to diversify farming activities to allied areas to in crease their
income.

c. AMOUNT OF LOAN

Maximum loan under the scheme towards land cost shall not exceed Rs 5 lack.
Cost of development/economic activity shall be financed under the bank’s other
financing schemes.

d. RATE OF INTEREST

Interest rate ranges from 1.75% below to 2.00% above BPLR for various limits.

e. REPAYMENT

Repayment of the loan will be 7 to 12 years in half yearly / yearly installments with
maximum of 24 months moratorium period. Gestation period / repayment due dates
etc. will be fixed according to income generation from the activity.

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 5. SOURCES OF AGRICULTURAL FINANCE IN INDIA

Farmers in India financing operating needs, short- and long-term goals, working capital
constraints and expansion objectives by raising funds on securities exchanges and from private
investors. They also use government subsidies, grants and tax incentives to fund operations by
applying for such subsidies, meeting designated investment criteria and hiring local workers.

The sources of agricultural finance are broadly classified into two categories:
(A) Non institutional Credit Agencies or informal sources, and
(B) Institutional Credit Agencies or Formal Sources.

A. Non-institutional Credit Agencies

i) Traders and Commission Agents:

Traders and commission agents advance loans to agriculturists for productive
 purposes against their crop without completing legal formalities. It often becomes
obligatory for farmers to buy inputs and sell output through them. They charge a very
heavy rate of interest on the loan and a commission on all the sales and purchases,
making it exploitative in nature.

ii) Landlords:
Mostly small farmers and tenants depend on landlords for meeting their
 production and day to day financial requirements.

iii) Money lenders:

Despite rapid development in rural branches of different institutional credit
agencies, village money lenders still dominate the scene. Mon ey lenders are of two
types- agriculturist money lenders who combine their money lending job with
farming and professional money lenders whose sole job is money lending. A number
of reasons have been attributed for the popularity of moneylenders such as:

(a) They meet demand for productive as well as unproductive requirement;

(b) They are easily approachable at odd hours; and

(c) They require very low paper work and advances are given against promissory notes or land.

Money lenders charge a very high rate of interest as they take advantage of the urgency
of the situation. Over the years a need for regulation of money lending has been felt. But lack of
institutional credit access to certain sections and areas had facilitated unhin dered operation of
money lending.

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B. Institutional Credit Agencies
The evolution of institutional credit to agriculture could be broadly classified into four
distinct phases - 1904-1969 (predominance of co-operatives and setting up of RBI), 1969-1975
[nationalization of commercial banks and setting up of Regional Rural Banks (RRBs)], 1975-
1990 (setting up of NABARD) and from 1991 onwards (financial sector reforms). Institutional
funding of the farm sector is mainly by commercial banks, regional rural banks and co-operative
 banks. Share of commercial banks in total institutional credit to agriculture is almost 48 percent
followed by cooperative banks with a share of 46 per cent. Regional Rural Banks account for just
about 6 per cent of total credit disbursement.

i) Government:
These are both short term as well as long-term loans. These loans are popularly
known as "Taccavi loans" which are generally advanced in times of natural
calamities. The rate of interest is low. But it is not a major source of agricultural
finance.

ii) Cooperative Credit Societies :

The history of cooperative movement in India dates back to 1904 when first
Cooperative Credit Societies Act was passed by the Government. The scope of the
Act was restricted to establishment of primary credit societies and non-credit societies
were left out of its purview. The shortcomings of the Act were rectified through
 passing another Act called Cooperative Societies Act 1912. The Act gave provision
for registration of all types of Cooperative Societies. This made the eme rgence of
rural cooperatives both in the credit and noncredit areas, though with uneven spatial
growth. In subsequent years a number of Committees were appointed and
recommendations implemented to improve the functioning of the cooperatives.

Soon after the independence, the Government of India following the recommendations of All
India Rural Credit Survey Committee (1951) felt that cooperatives were the only alternative to
 promote agricultural credit and development of rural areas. Accordingly, cooperatives received
substantial help in the provision of credit from Reserve Bank o f India as a part of loan policy and
large scale assistance from Central and State Governments for their development and
strengthening. Many schemes involving subsidies and concessions for the weaker sections were
routed through cooperatives. As a result cooperative institutions registered a remarkable growth
in the post-independence India.

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iii) Commercial Banks:
Previously commercial banks (CBs) were confined only to urban areas serving
mainly to trade, commerce and industry. Their role in rural credit was meagre i.e., 0.9
 per cent in 1951- 52 and 0.7 per cent in 1961-61. The insignificant participation of
CBs in rural lending was explained by the risky nature of agriculture due to its he avy
dependence on monsoon, unorganized nature and subsistence approach. A major
change took place in the form of nationalization of CBs in 1969 and CBs were made
to play an active role in agricultural credit. At present, they are the largest source of
institutional credit to agriculture.

iv) Regional Rural Banks (RRBs):

RRBs were set up in those regions where availability of institutional credit was
found to be inadequate but potential for agricultural development was very high.
However, the main thrust of the RRBs is to provide loans to small and marginal
farmers, landless laborers and village artisans. These loans are advanced for
 productive purposes. At present 196 RRBs are functioning in the country lending
around Rs 9,000 crore to rural people, particularly to weaker sections.

v) Micro financing:
Micro financing through Self Help Groups (SHG) has assumed prominence in
recent years. SHG is group of rural poor who volunteer to organise themselves into a
group for eradication of poverty of the members. They agree to save regularly and
convert their savings into a common fund known as the Group corpus. The members
of the group agree to use this common fund and such other funds that they may
receive as a group through a common management. Generally, a self-help group
consists of 10 to 20 persons. However, in difficult areas like deserts, hills and areas
with scattered and sparse population and in case of minor irrigation and disabled
 persons, this number may range from 5-20. As soon as the SHG is formed and a
couple of group meetings are held, an SHG can open a Savings Bank account with the
nearest Commercial or Regional Rural Bank or a Cooperative Bank. This is essential
to keep the thrift and other earnings of the SHG safely and also to improve the
transparency levels of SHG's transactions. Opening of SB account, in fact, is the
 beginning of a relationship between the bank and the SHG. The Reserve Bank of
India has issued instructions to all banks permitting them to op en SB accounts in the
name of registered or unregistered SHGs.

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 DIAGRAM

Non-institutional Institutional
Credit Agencies Credit Agencies

SOURCES

Other sources

C. Other sources
I. GOVERNMENT SUBSIDIES

 Public authorities in India provide grants, subsidies and tax incentives to organizations or
individuals abiding by governmental guidelines and willing to inv est in designated fields
or sectors. Such guidelines could mandate building and maintaining agricultural
infrastructure for periods of time, hiring local farming specialists and investing in
economically disadvantaged areas in the country. Officials could also provide financial
assistance---through export finance programs---to exporters who invest in designated
crop categories.

II. FOREIGN DIRECT INVESTMENTS

 Foreign organizations willing to establish local businesses in the country engage in joint-
venture agreements with Indian partners, invest in farming companies operating in zones
with profit potential, acquire local operators or build new subsidiaries. Multinational
organizations engaged in development aid, such as the International Monetary Fund or
the World Bank, also may provide financing to farmers. Such institutions could provide
low-interest loans, grants or subsidies to entities with funding needs.

35
  NABARD also provides support to research studies by academic and technical institu-
tions on matters having bearing on its developmental role. For this purpose, it has Research and
Development Fund.

7. Vikas Volunteer Vahini Programme

 NABARD has been organizing farmers club in association with voluntary agencies in
rural areas particularly in tribal areas, which have proved very helpful for credit institutions in
extending credit to poor farmers. These clubs, besides creating awareness among weaker sections
about the proper utilization of assets and importing modern method of farm technology, are
involved in educating the tribal people.

8. External Aid Project

 NABARD has been implementing various foreign aided projects. The projects are as-
sisted by World Bank Group, Organization of Petroleum Exporting Countries Fund for
International Development, etc., NABARD actively participates in formulation and imple -
mentation of such projects. It is also required to monitor the projects and submit final report to
aid agencies.

9. Inspection and Supervision of Co-operative Banks and Regional Rural

Banks

 NABARD has been entrusted with the responsibility of supervision of Co-operative and
Regional Rural Banks. For this purpose, it conducts inspections of Co-operative Banks and
Regional Rural Banks. These banks are also to submit periodical information to NABARD for
monitoring purposes.

 NABARD gives its recommendations to RBI with the matter relating to licensing of Co-
operative Banks and Regional Rural Banks. The nominees of NABARD on the boards of Co-
operative Banks and Regional Rural Banks monitor the working of banks.

10. Human Resource Development (HRD)

 NABARD provides assistance and support for the training of staff of other credit insti-
tutions engaged in credit dispensation for agriculture and rural development. Training facilities
are extended at its two training institutions Bankers Institute for Rural Development (BIRD), and
Regional Training Centers (RTCs).

Some funding of the courses conducted at the College of Agricultural Banking of RBI
and junior Level Training Centre’s of SLDBs are also provided. Apart from these, NABARD
conducts seminar.

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 2. MISSION
Promoting sustainable and equitable agriculture and rural developmen t through effective credit
support, related services, institution building and other innovative initiatives.

In pursuing this mission, NABARD focuses its activities on:

A. Credit functions :-

It involving preparation of potential-linked credit plans annually for all districts of the country
for identification of credit potential, monitoring the flow of ground level ru ral credit, issuing
 policy and operational guidelines to rural financing institutions and providing credit facilities to
eligible institutions under various programmes

Types of Refinance Facilities offered

Agency Credit Facilities

Commercial Banks
• Long-term credit for investment
 purposes
• Financing the working capital
requirements of Weavers' Co-operative
Societies (WCS) & State Handloom
Development Corporations

Short-term Co-operative Structure (State Co-operative

Banks, District Central Co-operative Banks, Primary • Short-term (crop and other loans)
Agricultural Credit Societies) • Medium-term (conversion) loans
• Term loans for investment purposes
• Financing WCS for production and
marketing purposes
• Financing State Handloom
Development Corporations for working
capital by State Co-operative Banks

Long-term Co-operative Structure (State Co-operative

Agriculture and Rural Development Banks, Primary • Term loans for investment purposes
Co-operative Agriculture and Rural Development
Banks)
Regional Rural Banks (RRBs)
• Short-term (crop and other loans)
• Term loans for investment purposes

53
 State Governments
• Long-term loans for equity
 participation in co-operatives
• Rural Infrastructure Development
Fund (RIDF) loans for infrastructure
 projects

 Non-Governmental Organizations (NGOs) - Informal

Credit Delivery System • Revolving Fund Assistance for
various micro-credit delivery
innovations and promotional projects
under 'Credit and Financial Services
Fund' (CFSF) and 'Rural Promotion
Corpus Fund' (RPCF) respectively

INTEREST RATES:

 Margin money:-

• The beneficiary's contribution to the project cost is necessary in order to ensure his stake in
the investment. Such margin money varies from 5% to 25% depending on the type of
investments and the category of the beneficiaries. The margin money can be by way of
contribution in cash or own or family labour. Large farmers, firms, corporate borrowers
including state-owned corporations, forest development corporations provide margin money
up to 25% pf the investment cost.

 Special focus :-

• Removal of regional and sectoral imbalances is one of the thrust areas and hence preference
is given to the needs of the underdeveloped areas. For example, the development of the
north-eastern region has been a key programme and special efforts have been made through
refinance offered on liberal terms and other supportive measures so that the rural credit
delivery system in the region is strengthened.

54
  Monitoring :-
• Special attention is paid to monitoring the projects that are offered assistance so that the
targets are met and the implementation is properly done. An evaluation of the project is taken
up and in the light of the findings the quality of the projects and their implementation
methods can be improved. District-oriented monitoring studies are conducted to evaluate the
 performance of the ongoing agricultural development schemes sanctioned. Specific sector
studies are also undertaken like floriculture, mushroom, aqua culture, agro-processing, etc. to
get an insight into the problems and prospects of these sectors.

• Guidelines are often issued for formulation of high-tech and export-oriented projects in farm
and non-farm sectors. Besides, even consultancy is also offered for p rojects, including
appraisal of projects even in cases where refinance is not secured from the bank.

DIRECT CREDIT

 Supporting Cooperatives
In order to strengthen the owned funds position of cooperative credit institutions and thereby
increasing their capacity to leverage larger resources, NABARD provides loans to State
Governments to contribute to the share capital of these institutions.

 Rural Infrastructure Development

With the objective of assisting State Governments in the completion of ongoing rural
infrastructure projects and to take up new infrastructure projects, the Rural Infrastructure
Development Fund (RIDF) was set up with NABARD in 1995-96 with contributions from
Commercial banks by way of deposits. The shortfall in agripriority sector lending was deposited
 by the commercial banks with NABARD as part of their contribution to the RIDF. The total
corpus covering RIDF I (1995-96) to X (2004-05) is Rs. 42,000 crore. Sanctions under all
trenches of RIDF as on 31 March 2005 were Rs.42948.51 crore against which the disbursements
were Rs. 25384.02 cr.

 Anticipated Benefits
It is anticipated that the projects sanctioned up to 31 March 2005 under RIDF would result in:
• Creation of additional irrigation potential in 92.47 lakh ha.
• Addition of 178000 km of rural road network & 331000 meter bridge length
• Contribution to the GDP to the tune of Rs. 11058 crore
• Generation of recurring employment of 48.01 lakh jobs and non-recurring employment of
13681 lakh man days due to increased irrigation
• Generation of non-recurring employment expected from non-irrigation projects: 23238 lakh
 person days

55
  Co-financing
To ensure substantial credit flow to agriculture and rural sector and to instill confidence in
 banks for financing hi-tech/export oriented agriculture projects involving large financial
outlays/sunrise technologies, etc., NABARD has entered into agreements for co -financing with
12 Commercial Banks thereby sharing the credit risks with partner banks.
Under this arrangement, projects have been sanctioned in areas like floriculture, organic
farming, milk processing, ethanol production, infrastructure development and forestry.

 Bulk-lending/ Revolving Fund Assistance

 NABARD provides bulk-lending facilities to NGOs. As on 31.3.2005, 30 agencies have been

sanctioned assistance of Rs 27.07 crore against which Rs.15.18 crore has been disbursed.

REFINANCE AGAINST INVESTMENT CREDIT

This is a long-term refinance facility. It is intended to create income generating assets in the
following:

• Agriculture and allied activities

• Artisans, small scale industries, Non-Farm Sector ( Small and Micro Enterprises),
handicrafts, handlooms, power looms, etc.

• Activities of voluntary agencies and self-help groups working among the rural poor

The credit is normally provided for a period of 3 to 15 years.

Investment credit leads to capital formation through asset creation. It induces technological up
gradation resulting in increased production, productivity and incremental i ncome to farmers and
entrepreneurs.

 Eligible Institutions

State Cooperative Agriculture and Rural Development Banks (SCARDBs), State Cooperative
Banks (SCBs), Regional Rural Banks (RRBs), Scheduled Commercial Banks, Scheduled
Primary Urban Cooperative Banks, North East Development Finance Corporation Ltd. (NEDFI),
ADFCs (ADFT, ABFL & NABFINS) and NBFCs are eligible for refinance from NABARD for
investment credit in the rural sector.

 Eligible Purposes

Some of the major purposes covered under Investment credit are Minor Irrigation, farm
mechanization, plantation/ horticulture, animal husbandry, storage/market yards, fisheries, post-
harvest management, food/agro processing, non-farm sector including rural industries,
microfinance, purchase of land (for small/marginal Farmers, share croppers etc.), rural housing

56
 • ATTENDING TO COMPLAINTS IN RESPECT OF COOPERATIVE BANKS (EXCLUDING URBAN
COOPERATIVE BANKS) AND RRBS

SUPERVISORY STRATEGY

I N THE WAKE OF THE

THE BANKING SECTOR REFORMS, NEW SET OF INTERNATIONAL
 NORMS/PRACTICES WERE MADE APPLICABLE TO COMMERCIAL BANKS (CBS) TO MAKE
THEM MORE COMPETITIVE AND SUSTAINABLE IN THE CHANGING SCENARIO. THE CO-
OPERATIVE BANKS AND RRBS WERE ALSO TO FUNCTION IN THE GENERAL BANKING
ENVIRONMENT, EMERGING OUT OF THE FINANCIAL SECTOR REFORMS, INTRODUCED BY THE
GOI/RBI. ACCORDINGLY, THE PRUDENTIAL NORMS WERE EXTENDED TO THEM IN PHASES.
WHILE THE CAPITAL ADEQUACY NORM HAS NOT YE T BEEN MADE APPLICABLE TO THESE
BANKS, THE OTHER PRUDENTIAL NORMS VIZ. INCOME RECOGNITION, ASSET CLASSIFICATION
AND PROVISIONING, WHICH WERE MADE APPLICABLE BY RBI TO THE COMMERCIAL
BANKING SECTOR HAD BEEN EXTENDED TO COVER RRBS IN 1995-96, SCBS AND DCCBS
IN 1996-97 AND BY NABARD TO SCARDBS IN 1997-98. NABARD,
1997-98. NABARD, THROUGH A
CONCRETE AND TIME-BOUND SUPERVISION STRATEGY, FACILITATE THESE BANKS TO
ADJUST TO THE NEW FINANCIAL DISCIPLINE SO AS TO INTERNALIZE PRUDENTIAL NORMS
STIPULATED.

B. DEVELOPMENT AND PROMOTIONAL FUNCTIONS

Credit is a critical factor in development of agriculture and rural sector as it enables investment
in capital formation and technological up gradation. Hence strengthening of rural financial
institutions, which deliver credit to the sector, has been ident ified by NABARD as a thrust area.
Various initiatives have been taken to strengthen the cooperative credit structure and the regional
rural banks, so that adequate and timely credit is made available to the needy.

In order to reinforce the credit functions and to make credit more productive, NABARD has been
undertaking a number of developmental and promotional activities such as:-

• Help cooperative banks and Regional Rural Banks to prepare development actions plans for
themselves

• Enter into MoU with state governments

governments and cooperative banks specifying their respective
respective
obligations to improve the affairs of the banks in a stipulated timeframe

• Help Regional Rural Banks and the sponsor banks to enter into MoUs specifying
specifying their
respective obligations to improve the affairs of the Regional Rural Banks in a stipulated
timeframe

• Monitor implementation of development action plans of banks and fulfillment of obligations

under MoUs

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 • Provide financial assistance
assistance to cooperatives and Regional Rural Banks for establishment
establishment of
technical, monitoring and evaluations cells

• Provide organization development intervention

intervention (ODI) through reputed training institutes like
Bankers Institute of Rural Development (BIRD), Luck now www.birdlucknow.in , National
Bank Staff College, Luck now www.nbsc.in
now www.nbsc.in and College of Agriculture Banking, Pune, etc.

• Provide financial support for the training institutes of cooperative banks

• Provide training for

for senior and middle level executives of commercial banks, Regional Rural
Banks and cooperative banks

• Create awareness among the borrowers on ethics of repayment through Vikas Volunteer
Volunteer
Vahini and Farmer’s clubs

• Provide financial assistance to cooperative banks for building improved management

information system, computerization of operations and development of human resources

3.ORGANIZATION STRUCTURE

Board of directors

Chairman

Managing director

Executive directors (1)

 ─ 
Head office department
departmentss Regional offices (28) Training establishments (6)

Sub office special cell (Srinagar) District development offices

(391)

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 4. NABARD BUDGET FOR AGRICULTURAL FINANCE IN INDIA

1) RS 11,000 CR. CLEARED FOR CROP LOAN WAIVER

The government will release Rs 10,901 crore to state-run banks to enable interest subvention
for short-term crop loans up to Rs
R s 3 lakh to farmers for the current financial year. On Thursday’s
cabinet meeting, chaired by the Prime
P rime Minister, decided this.

Public sector banks (PSBs) provide such a subvention

subv ention to enable short-term crop loans at seven
 per cent interest. Also, a three per cent subvention is given to those who start repaying their loans
within the first year of disbursal.

2) AGRI MINISTRY PUSHES FOR RS 5,000-CR SCHEME FOR POST-HARVEST LOGISTICS

Officials said the aim was to ensure availability of farm produce a cross the country at
affordable prices

The Union ministry of agriculture has planned to ask for Rs 5,000-crore budget during
du ring the 12th
five-year Plan (2012-17) for a scheme to allow private companies to collaborate with farmers to
 produce, harvest, process, transport and market various agro products. Officials said the aim was
to ensure availability of farm produce across the country
co untry at affordable prices.

3) MAHARASHTRA FARMERS TO HARVEST TECH BENEFITS UNDER NABARD-IMD PROJECT

About 50,000 farmers in 10 districts of Maharashtra are expected to benefit from a pilot
 project which will disseminate weather-related inputs using Information
Information and Communication
Technology (ICT) to improve land productivity and boost crop output.

It is being launched jointly by the National

N ational Bank for Agricultural and Rural Development
(NABARD) and India Meteorological Department (IMD), and is to be financed under the
Farmers’ Technology Transfer Fund

4) MAHARASHTRA FARMERS TO BENEFIT FROM NABARD-IMD PROJECT

The project will disseminate weather-related inputs to farmers to improve land productivity
and boost crop output

About 50,000 farmers in ten districts of Maharashtra are expected to benefit from a pilot
 project, which will disseminate weather-related inputs using Information
Information and Communication
Technology (ICT) to improve land productivity
produ ctivity and boost crop output. It is being launched
laun ched
 jointly by the National Bank for Agricultural and Rural Development (NABARD) and India
Meteorological Department (IMD), and is to be financed under
und er the Farmers' Technology
Transfer Fund (FTTF).

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 5. NABARD'S PERFORMANCE

Past Performance
 During 1983-84 NABARD mobilized net resources amounting to Rs. 774 cores, which
however fell to Rs.541 cores during the year 1984-85. During this year NABARD
sanctioned Rs. 1233 cores to SCBs for financial seasonal agricultural operations. It also
 provided medium-term and long term credit facilities for the benefit of the agricultural
sector. During 1984-85, its total outstanding amounted to Rs. 1018 cores and limits
sanctioned amounted to Rs.1688 cores.
  NABARD also assisted the development and promotion of agricultural investments in the
less developed and/or under banked states. For this purpose during the year 1984-85, it
disbursed Rs.455 cores.
 For the year 1986-87 NABARD could mobilize Rs.887 cores towards its aggregate net
resources for providing rural credit.
 During 1986-87, NABARD completed the inspection of 178 CCBs, 86 RRBs, 7 SLOBs
and 30 other institutions. It also approved and assisted during the year, 5 research
 proposals, 17 seminars and several conferences from its R&D fund, and incurred an
expenditure of Rs.3.41 lakhs on this account.
 During the year 1987, NABARD also introduced a 10 point action programme for
rehabilitation of weak primary land development banks and branches of state land
development banks. The action program was with regard to:
(I) investigation of overdue;
(ii) Strengthening of organization and management;
(iii) Review of loan policies and procedures; and
(iv) Strengthening of the resources of the LOBs.
 For the year 1989-90, the short term credit limits sanctioned by NABARD for financing
seasonal agricultural operations aggregated to Rs.2807 crores. During this period
 NABARD provided refinance assistance to the tune of Rs.549 crores.
 During 1995-96, the total amount of refinance disbursements by NABARD increased by
less than 2% to Rs.3064 crore from that of the previous year. During this period a Rural
Infrastructural Development Fund (RIDF) was created within NABARD for facilitating
rural infrastructure projects.
 During 1996-97 NABARD's resources increased to Rs.2963 crores against rs.1617 crore
in the previous year.

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 Current Performance

 NABARD saw its refinance to commercial banks increase by over 50% year on year, for the
fiscal ended March 31, 2006. For 2005-06, the refinance was Rs.4028 crore against Rs.2569
crore in 2004-05. As on February 2006, commercial banks, regional banks and co-operatives
disbursed an aggregate of Rs.1, 46,668 crores by way of farm credit. This is against Rs.1, 25,000
crore in 2004-05.

Purpose wise Disbursements under investment Credit during 2007-08

Sector/Purpose/Activity Amount (Rs. In Lakh) % to Total Disb.
Agriculture
Minor irrigation 40368 4.46%
Land development 46214 5.11%
Farm Mechanization 174765 19.32%
Plantation & Horticulture 34182 3.78%
SGSY Farm Sector 13242 1.46%
SC/ST -AP-Farm Sector 1648 0.18%
Other Agriculture 45717 5.05%
356136 39.37%
Allied to Agriculture
Fisheries 2545 0.28%
Dairy Development 60587 6.70%
Poultry 21629 2.39%
Storage/Market Yard 13628 1.51%
Wasteland Development 639 0.07%
99028 10.95%
 NFS
SGSY Non-Farm Sector 12616 1.39%
SC/ST -AP-Non Farm Sector 404 0.04%
 Non Farm Sector 274795 30.38%
287815 31.82%
Others
 Non-conventional energy 98 0.01%
Self Help Group 161550 17.86%
161648 17.87%
TOTAL DISBURSEMENT 904627 100.00%

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The purpose wise disbursement for the year 2007-08 shows that total of Rs.9,04, 627 was
disbursed for various purposes like agriculture and allied activities, non -farm sector etc. and
maximum 32% is allotted to agriculture sector.

Purpose wise Disbursements under RIDF during 2007-08

Purpose Amount (Rs. In Lakh) % Share
Irrigation 286955 35.71%
Rural Roads 257338 32.03%
Drinking Water Supply 64688 8.05%
Bridges 58159 7.24%
Primary/Secondary School 49227 6.13%
Power Sector 19294 2.40%
Watershed Development 17980 2.24%
Flood Protection 13225 1.65%
Soil Conservation 8827 1.10%
Forest Management 8030 1.00%
Drainage Improvements 5931 0.74%
Storage/Market Yard 3467 0.43%
Others 10371 1.29%
TOTAL DISBURSEMENT 803492 100.00%

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 4) CONCLUSION

Both the co-operative banks advance credit mostly to agriculture. First bank advance short-term
and medium term loans while the second bank advances long-term loans. The Reserve Bank of India as the
Central bank of the country took lead in making credit available to agriculture through these banks
 by laying down suitable policies.

 NABARD plays very important role in rural & agricultural development through The Committee
to Review Arrangements for Institutional Credit for Agriculture and Rural Development. It has
 been accredited with matters concerning policy, planning and operations in the field of credit for
agriculture and other economic activities in rural areas in India. It takes measures towards
institution building for improving absorptive capacity of the credit delivery system, including
monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of
 personnel, etc.

As per my opinion India should invest more in agriculture &manufacturing sector rather than to
invest more in service sector. As India is more wo rkforce intensive country & India’s po pulation
is large as compared to other developed countries. If India will invest in agriculture, it will
enhance India to grow. Today India is growing faster as inflation rate is high but there is issue of
unemployment. The investment in agriculture & manufacturing sector help India to increase jobs
which will control unemployment.

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